Tech

Amazon Blows Up the Tablet Market

This is war. Amazon’s jaw-dropping new collection of Kindle Fire HD tablets recalibrates almost everything we thought we knew about the tablet market.

It lowered prices while offering enhancements and fresh technology in almost every area imaginable. It took the warning shot of the successful Kindle Fire tablet, based on Android 2.3 "Gingerbread," and turned it into a fusillade of tablet options.

As Amazon CEO Jeff Bezos unveiled one Kindle Fire after another — there were actually so many I got confused — it became clear that there were no rules about prices, screen sizes, and component technologies.

Amazon eased into what would become landmark event with the new Kindle Paperwhite ereader. The company that essentially launched the e-reading generation is not done with reflective image technology. Bezos said Amazon actually invented new screen technology for the super-white, ultra-clear and now self-lit ereader. However, it’s unclear if they worked with E-Ink to develop it or really did build it on their own.

The expected Paperwhite, however, was just a table setting for tablet-palooza.

First Amazon dropped the price of the original Kindle Fire to $159, but not without making it faster (better processor and more RAM) and improving battery life. Then things started to get crazy.

Going HD

Bezos gleefully displayed the new Kindle Fire HD. But wait, he had a tablet in each hand. What was going on here? Amazon cooked up a 7-inch tablet and an 8.9-inch one, too. Two powerful devices with dual-core CPUs and, on the 8.9-inch device, a 1,920 x 1,200 display.

The kicker: the new 7-inch Kindle HD costs $199 and the larger Kindle Fire HD, which is packed with a shocking amount of cutting edge technology (Dolby Digital, MiMo Wi-Fi, laminated touch sensor), is just $299.Then, while our jaws were still hanging open, Bezos dropped the bomb: a $499 4G LTE Kindle Fire HD. To put this in perspective, a 32GB, 4G LTE iPad 3 costs $729, $230 more than the 1-inch-smaller Kindle Fire HD.

That’s not a shot across Apple’s bow, it’s a nuclear blast in the center of Apple’ CEO Tim Cook’s desk.

Bezos essentially just rewrote the rules for the tablet game. And those rules are very simple: hardware doesn’t matter. Services are king. And in the kingdom of services, Amazon rules.

"We want to make money when people use our devices, not when they buy our devices," said Bezos as he unveiled the new tablets.

The strategy is not surprising. Amazon and Bezos have shown a strong willingness to upgrade content consumption devices to suit consumer needs. They quickly realized that the key to success was not just in selling a lot of hardware, it was making the purchase and consumption experience seamless.

Bezos has never wavered from that strategy, but he did everything in his power today to make it plain.

Engulfed in Fire

Today’s announcements though, expanded on that idea with a “something for everyone” approach. Amazon now has more tablets than Apple and in a wider variety of options. From E Ink to LCD. From 7-inch to 8.9-inch, and from WiFi-only to 4G LTE. Amazon’s strategy is not about up-selling users to more expensive hardware and services (they even started the 4G option by giving away 250 MB of data and cloud storage); it’s about making sure you can have your Amazon content how you like it, when you like it and where you like it.

With this wide variety of tablet options, Amazon firmly establishes itself as the number two player in the tablet space. It has, by its own measure 22% of the US tablet market. These options (starting as low as $69 and topping off at $499) could vault it to 50% by early 2013.

Apple will surely counter this fall with an iPad mini. It will certainly be cheaper than the iPad Retina and show off all the great features found in iOS 6. However, it’s unlikely Apple will make the same kind of statements about services and hardware, or that Tim Cook will say anything like this gem from Bezos, “People don't want gadgets anymore. They want services.” Apple’s business is built on gadget lust. Tim Cook knows that he has to deliver a stunning new device every year or so to maintain the Apply mystique.

That, at least, is the perception of Apple’s business. The reality is Apple makes billions in app development and sales. But no one thinks of them as a service. Perhaps it’s because Apple sets the stage for new gadgets with mobile operating system updates, while Amazon barely mentions the platform. No one knows for certain, for example, which version of Android is under the super-slick Kindle Fire HD interface. The only “software” that matters to Amazon and Bezos is the kind that lets you consume and manage your Amazon-purchased content.

Can Apple simply respond this fall with an iPad that is less powerful and more content consumption-oriented, or does Tim Cook need some new artillery? You be the judge.

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